Section: 5 Capital Market Securities

Sub Section: 5 Equity Market

Equity markets, or markets for residual claims, are where common and preferred shares are traded. Examples include the New York Stock Exchange, NASDAQ, London Stock Market and Saudi Stock Market (Tadawul). Equity securities are also called residual claims because the holders of these securities have a right that is lower in hierarchy than the debt/fixed-income securities. In case of a bankruptcy when the firm’s assets are liquidated, the shareholders have a claim to what is left after paying all other claimants, such as the tax authorities, employees, suppliers, bondholders, and other creditors. There are mainly two types of equity securities:

  • Common Stock

  • Preferred Shares

In the following chapters, types of securities are discussed in greater detail.